NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance
Ms. Anita Rao insured her shop's stock of Rs 10 lakh under two fire policies: Rs 6 lakh with Insurer X and Rs 4 lakh with Insurer Y. Stock actually worth Rs 10 lakh suffers a Rs 5 lakh loss. Applying the principle of contribution (rateable proportion of sum insured), what will Insurer Y pay?
Insurer Y will pay Rs 2 lakh. Under contribution, each insurer bears the loss in proportion to its sum insured. Y covers 4 of the total 10 lakh, which is 40 percent, and 40 percent of the Rs 5 lakh loss is Rs 2 lakh, with X paying Rs 3 lakh.
- ARs 2.5 lakh
- BRs 3 lakh
- CRs 1.5 lakh
- DRs 2 lakhCorrect
Explanation
Y's share = 4/(6+4) x 5 lakh = Rs 2 lakh, and X pays 3 lakh, totalling the Rs 5 lakh loss. Rs 3 lakh is X's share. Rs 2.5 lakh splits equally, ignoring sums insured. Rs 1.5 lakh is wrong arithmetic from reversing proportions of a different base.
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